Top New Follow Journal Login
Dear All,
I am working with a manufacturing company in gurgaon. Till now we have been calculating EL on Gross salary, but now our directors are saying us to calculate EL on Basic. Kindly help me in this.
From India, Delhi
EL shall be applicable on gross salary, there is always reasoning and rational on basis on any law. suppose if the employee is comming to office he shall get the complete slary including all allowance viz HRA, Conveyance, Medical etc. and if he on leave then whether he will not pay HRA or other allowance. it should be on gross slary instead of Basic.

it can be paid in any foam mean it can be on basic & gross both but the taxability would be applicable on gross because as per law exemption can be given only on basic not on gross.
From India, New Delhi
Dear Harry,
It is a matter of confussion. But EL is long time calculated in basic. Why?. Here is the facts.
Basic >= Minimum wages per day * Total No of days present. i.e if M.W is 170 then basic per month is 4420.
So all other allowances that you give him is actually helping him to come to this company for working. Eg: HRA, In order for him to come and work in a n organisation, he needs to have shelter. So you pay him for his shelter. So its an added money you give him to come and work. Only basic wages is the salary that you give for his work done.
So if an employee is on leave then he has not worked. So you automatically cut his allowance to. So whay pay him his house rent if he didn'e come for work. Hope I was not arrogant towards the employees side.
Yashwanth R
SKY technologies
From India, Bangalore
Dear Harry,
Calculation of leave encashment is always on basic salary because other components are supporting to Basic Salary , So no need to pay other supportive components.
Agree with Mr. Yashwanth,
Chill HR
From India, Gurgaon
let take that I am on leave for four days & apply for El for these 4 days leaves. here I will get entire four day of leave which I believe will be equal to my four days of gross salary(FULL SALARY) not basic. my point is when it comes to enchantments your are telling me to do on Basic but for purpose of leave I take it as full day salary. This is wat I am not been able to understand.
From India, Delhi
Dear Harry,
What i suggested you in my last post is the same what the practice maximum organisations are following.
While working period if one need EL then means full day salary, not basic.
But leave encashment is entirely depend upon the company to company.
Case 1 : If the company policy says that company will deduct / pay notice period on basic the leave encashment must be on basic salary.
Case 2 : If notice period deduction / Payment will be on Gross Salary then leave encashment must be on Gross salary only.
Policy of leave encahsment is totally based upon the notice period, and that must be well defined at the very beginning with the office policy, not at the time of encashing leaves and searching the way out.
Chill HR !!
From India, Gurgaon
Dear Harry, Good Morning...!!! All leaves are always calculated on Basic + DA, not on Gross Salary... Leave Encashment = Basic + DA /30 X No. of Leaves. It includes SL, PL & CL. Regards, Vani M HR
From India, Bangalore
Dear Vani,
Are you sure that "It Includes SL, PL & CL"??
Only EL or we can say PL (Earned Leaves or Privilege Leave) will encash not CL (Casual Leaves) and SL (Sick Leave) if i am not mistaken.
Chill HR !!

From India, Gurgaon
There had been repeated posts on this subject.Detailed discussions have taken place in this forum on this subject
However I am repeating certain points as it has come up for discussion once again
1. When an employee is availing leave whether it is earned leave or casual leave or sick leave, his full salary is given. If an employee 's basic salary is Rs 1000 and this other allowances are Rs 1000, then he gets Basic plus other allowances full when he or she avail leave with pay
2. When an employee gets encashment of leave,then generally Basic plus DA is given The argument here is that when an employee avails encashment his HRA and other allowances are already given in terms of salary. The logical argument is there is no need to pay the same amount twice.
From India, Chennai
Dear Harry, SL & PL will be encashed every financial year. Sorry CL can not be encashed and end of the year CL will get laps. Regards, Vani M HR
From India, Bangalore
Encashment at the end of year is individual Companies policy decision. Some Companies used to offer encashement CL just to dissuade peoplr from taking leave often. I have seen this practice in a very few companies in seventies and eighties. Encashment is not a legal right except at the time of cessation of employment and this is restricted to Earned Leave.
In one company where I was working, the management gave me encashment of Sick Leave eventhough I was there for three years only. They gave it as a matter of goodwill. I have given encashment of CL for certain category of employees
From India, Chennai
Dear Vani,
I have the same doubt as Gurgoun HR.
The thing is only EL/Pl is cash-able at the end of the year. It is said as Leave with Wages in Factories act. i.e 1 day EL for every 20 days.
SL is always calculated in two ways (60 days once). If I'm wrong pl correct me. One for Employees covered under ESIC and the rest.
If covered under ESIC, the employee shall give a writ to the HR dept. The HR shall co-ordinate with the ESIC official and get the payment done for the employee through bank.
If the Employee is covered under the Medical allowance (i.e above 15000), then the company shall avail SL for the Employee.
Hope I was reight... Pl correct Me...
From India, Bangalore
correct me if i am wrong :
" Section 79 (3) of Factory Act 1948 states that If a worker is discharged or dismissed from service or quits his employment or is superannuated or dies while in service, during the course of the calendar year, he or his heir or nominee, as the case may be, shall be entitled to WAGES in lieu of the quantum of leave to which he was entitled immediately before his discharge, dismissal, quitting of employment, superannuation or death, calculated at the rates specified in sub-section (1), even if he had not worked for the entire period specified in sub-section(1) or sub-section (2) making him eligible to avail of such leave, and such payment shall be made" Now when we taking of WAGES it will come under Payment of Wages Act not Minimum Wages Act. so the rule I believe is contradictory in itself"
From India, Delhi
Dear All,
Leave encashment would be on Gross salary. Please prefer Factory Act - Leave module.
Clearly mentioned in Factory Act that Leave encashment on gross salary.(Including all allowances, which you are paying regularly in every month.)
From India, Mumbai
Dear Yashwanth,
Dont get confused. If the employee has taken leave then its not a problem, If the employee left with SL it will be encashed at the end of the year.
Dear Faruk Shaik,
EL & SL is calculated on Basic + DA.
Vani M
From India, Bangalore
earn leave calculaton must be on gross as per factory act
reason for paying on basic- only those factory are providing leave policy better then under factory act are exempted from the rule under factory act they can pay on basic
From India, Faridabad
Dear All,
It actually depends on individual companies. and very few companies calculates the leave encashment on Gross salary to attract and retain the people. As far as Sick leave is concerned, it is encashed so that the employee would not take the sick leaves even.
Vani M
From India, Bangalore
Section 80 of the Factories Act says that if an worker avail leave he shall be paid for the days of leave @ average total earnings excluding OT & bonus but including DA and cash equivalent of concessional sale of food grains or other articles.Practically when employee is on EL full wages are paid.Sec 80 is not meant for EL surrender .The concept of EL surrender was not before the legislature in 1948.Leave surrender is not a legal right.Sec 79 deals with payment in lieu of leave where the employee service come to an end,not about EL surrender while the employee is in service.Leave surrender and payment for that depend on each CO's policy and practice.
From India, Thiruvananthapuram

Dear Harry,

The query has got some bugs in it. Is it about calculation of EL or calculation of salary during EL. The answers would depend on the query. Presuming that he requires clarification only as to -

1) how to calculate leave salary for the EL one avails EL under Factories Act/Rules as he says he is in a manufacturing Co.

2) And the wages for EL is not "Encashment of EL" or "Encashment on cessation of employment" So this discussion is not about it.

If So let us see what the Factories Act/Rules says about it -

Wages during Leave Period. For the period of leave allowed to a worker according to rules, he shall be paid at a rate equal to the daily average of his total full-time earnings for the days on which he actually worked during the month immediately preceding his leave~The average rate is to be calculated, exclusive of any overtime and bonus, but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the worker of food-grains and other articles. The cash equivalent, referred to above, is to be computed according to the method used when calculating the extra wages payable -for overtime work. (See. post)-Sec. 80

Also go thro' similar discussions in these links:

<link no longer exists - removed>

From India, Bangalore

Attached Files
Membership is required for download. Create An Account First
File Type: doc FACTORIES ACT-leave rules.doc (36.5 KB, 607 views)
File Type: doc EL under Factories Act.doc (56.5 KB, 551 views)

Earned Leaves when consumed are calculated on Gross Salary basis, however while en cashing the balance EL normally Basic+DA is used as base.
From India, Pune
Dear Harry,
EL= Basic+DA/26*Remaining days, as simple is this.
But if employee will on leave you deduct the payment from gross not only from basic, so pay them on Gross,
For you the formulla will be:
EL= Gross/26*remaining days
CL,SL, never encash.
Vikas Sharma
From India, Jodhpur
Dear Harry
# If your question pertains to "workman" - The EL should be considered on the Basic+DA+and allowances.
In short the amount he will get (wage for a day) if he avails that Leave.
# In case of Non workman (executives) the company can have its own policy whether to pay on Basic only or on total CTC depending upon the objective- weather you want employees to avail more leaves and help them to maintain work-life balance or you want them to put more days for company and pay for it to motivate them.
Hope this helps you.
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
Dear All: EL is to be encashed on Basic only & not on gross. It is in line with IT Act 1961, wherein exemption is given only on encashment done on Basic. Rgds Dxion, Tata Trent, Pune
From India, Mumbai
Dear All, Kindly advise whether EL is calculated on the basis of number of days in year or 30 days. Thanxs & Regards C.M.Mohla
From India, Delhi
It depends on your policy.If you are allowing strictly as per FA Act,@ one day for every 20 worked days.If it is an establishment (in kerala) flat 12 EL for an employee who has worked in the previous year for 240 days.This can be accumulated to 24 days.In factories also this 240 days criteria is there.
Varghese Mathew
From India, Thiruvananthapuram
Dear Colleagues,
I agree with our seniors;
that EL/PL Encashment is on Basic+DA..(whether working or ex-employee..)
i.e. EL/PL= Basic+DA/26*No. of Days
EL/PL availed/leave taken is on Gross Salary..(which means an employee is working within a company, however he/she has taken leave(s) for some personal exigencies)
i.e. EL/PL= Gross Salary/30*No. of Days
I hope am not mistaken, however if am so, I request seniors to correct me & please share your knowledge with us..
Thank you.
From India, Mumbai
Hi! Can anybody tell me from which time is E.L. should be counted, from the date of appointment or from the date of confirmation? Adhip Sen_gupta
From India, Patna
Again a lot depends on Co policy.Better to count it from DOJ but allow to avail it after confirmation. Varghese Mathew
From India, Thiruvananthapuram
EL should always be counted from the date of appointment as per all statutory provisions be it Factoriest act or Shops and Establishment act or Mines act or Palanatations Act etc
From India, Chennai
It is amusing to see so many diverse viewpoints and one's own interpretation of the query !!!
It is appalling to see so much confusion with a simple concept as Earned Leave; and I think it calls for an Act to have a Certifying Body for HR Managers.
In what directions should a company act if the concerned HRs give these kinds of contrary opinions??
Imagine the situation if the matter was about Medicine & Surgery; Civil Engineering or say, Finance ?? One can imagine the result.
I appreciate the correct inputs from Kumar S. and T.Sivasankaran.
From India, Delhi
Dear Faruk
Pl go through this.
Factories Act, 1948 [sec - 80 (1)]
For the leave allowed to him under Section 78 or Section 79, as the case may be, a worker shall be entitled to wages at a rate equal to the daily average of his total full time earnings for the days on which he actually worked during the month immediately preceding his leave, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the worker of foodgrains and other articles:
They never mentioned other allowances. Its that Pay the Basic + DA + Cash equivalent that u would have paid if he would have come to the company.
Pl correct me If I'm Wrong
From India, Bangalore
Dear All
As per the Act whether its S&E or Factory's Act it should be 36 days pa i.e EL 12, SL 12 and CL 12.
SL means Sick leave can be carry over to next year (discretion of the management) as the employee will not be sick in the current year but he or she can be next year for this purpose its carried over to next year and ITS NOT ENCASHABLE AMT
For CL and EL or PL its encashable by the company. In some company, LTA can be adjusted against their PL after submitting the proof.
As per the Act the leave policy is based on the calculation on BASIC + DA OR VDA not gross as this affects the employer outflow. BASIC + DA oR VDA / 30 * no of days available (basic will be last salary drawn as per the policy of leave)
any deviation pl infm me
Vijayalakshmi J
Payroll Management consultant
From India, Chennai
As per Factories Act it is not 36 days .There is no provision of CL and SL in Factories Act.Regarding EL encashment Mr Yeshwant is right. Varghese Mathew 04712542059
From India, Thiruvananthapuram
Dear Sir,
My name is Ashish Rana i am working in a Delhi based company i just want to know that if our manpower is working as a contractor in a Haryana based company ( our customer ) then does it necessary for us to pay the leave encashment to our staff as per the "Haryana leave with wages rules" or we should pay the leave enashment as per "Delhi shops & establishment rules".
Please help.
Ashish Rana
From India, Jaipur
no. of HR persons have told that EL should be on Basic Salary.
I dont know on which behalf they said,
Everyone must read that factory act because it has cleared all the query regards this read chapter 5
EL payment must be on total full time earning of employes (Note factory can be exempted from this section if they provide better leave facility to employees but it should be approved in standing order of Company)
So clearly it should be on gross salary
i also know that number of company are giving el encasement on basic it is totally illegal if they have not approved leave policy
From India, Faridabad
Hello Vani
Leave encashment does not includes the SL and CLs. As per most of the Shops and Establishment acts leave encashment is only on Earned leave. The caliculation is on Basic generally and varies from company to company as a practice.
Pl. refer to the appropriate leagal positions before posting anything.
From India, Hyderabad
Reply Here Start New Discussion

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2017 Cite.Co™